Sustainable business refers to the role that companies play in our world. Some use terms like corporate social responsibility (CSR). Others use expressions like corporate citizenship or shared value. They all refer to the impacts that business has on society and the environment – and the impacts that society and the environment have on business.
Sustainability covers: social issues (for example, labour relations or human rights); environmental impacts (like climate change or waste); economic aspects (such as jobs or taxes); and governance considerations.
The Brundtland Commission in 1987 set out the most widely used definition as: “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. But what does this mean in practice for companies?
Sustainable business has an inherently long-term time horizon. It’s about creating the right conditions to sustain business success – for shareholders and other stakeholders today and in the future. Traditionally, many companies focused on philanthropy. Today, most companies consider a much wider range of business risks and opportunities.
So sustainable business is about core operations – not peripheral activities. It requires looking ahead, and planning with a long-term mindset. In order to deliver business and social value, it needs to be approached strategically.
Why is Sustainable Business Important?
The external environment is changing fast. Customer needs are rapidly evolving. Regulatory and investor requirements are changing. For any business, material risks might include energy prices, migration, climate change impacts, cyber-security or corruption. A managed approach to sustainable business can help to manage an organisation’s biggest risks and more.
But it’s not just about managing risks. By understanding long-term trends, companies can respond and realise new opportunities. Meeting future customer needs, responding to regulation faster than competitors, building reputation and motivating staff can all help create a compelling business case.
How to Develop a Sustainability Strategy
The starting point for a strategy must be to ask: what impact does our business have on society? Understanding the different touchpoints, positive and negative, paints a picture of where change may be needed. This is why sustainability programmes vary quite significantly between companies. A food business may focus on nutrition and packaging waste, whilst an oil company first prioritises greenhouse gas emissions and human rights.
A fundamental component of sustainable business is listening and responding to stakeholders. Stakeholders are groups and individuals who have an effect on – or are affected by – the corporation. These include workers, shareholders, regulators, non-profits, suppliers, customers and local communities. By understanding what these groups are looking for in the short-, medium- and longer-term, the business can be more successful.
Developing a sustainability strategy is an ideal time to engage colleagues in the business. Playing a role in developing the strategy can help to ensure senior leadership support the plan and employees understand their role in delivering it. Outside of the business, partnerships with external organisations – such as non-profits – may be needed to help deliver the strategy.
The Need to Prioritise
Increasingly, there is an expectation for business to tackle a wide range of issues. How then do you move from ideas to focused action? Every business needs to prioritise. The process of identifying, prioritising, managing and reporting on issues is referred to as ‘materiality’. The result is a set of priority issues that are relevant commercially as well as to the outside world.
Many companies find themselves in the situation where they have a broad range of programmes and priorities. Teams and budgets can feel stretched. People working in these companies often say that they feel like they are doing so much, but lack the tangible evidence to show for it.
A sustainability strategy sets out the priorities for deploying resources, creating an impact and communicating results. A good strategy can help to: build buy-in amongst colleagues; guide resources and investment into areas that are most important; engage external stakeholders in a meaningful dialogue; and drive performance by pushing the company to achieve goals.
Linking Sustainability to the Business
Sustainable business delivers real results when it’s linked to the core business. The next step on the journey is often to ask: why is our company in business? Many organisations have a vision, mission and set of values. Others develop them as part of their sustainability programmes.
Being clear on the purpose of a company is crucial to shaping an authentic sustainability strategy. This ensures that rather than featuring as a sideshow or afterthought, the sustainability strategy can build on the organisation’s purpose, history and core assets. It means that rather than being a drain on resources, the strategy can create real value by contributing to business growth.
Finally, any credible strategy needs commitments. Targets are the backbone of an effective sustainability strategy. Today, stakeholders expect companies to have public goals as a sign of performance ambition. Targets, backed up by Key Performance Indicators (KPIs), provide a set of objectives for management, and a yardstick for external audiences to assess progress.
Moving from ad hoc initiatives to a strategy is no easy task. It requires planning, patience, persuasion and perseverance. But the prize at the end is clear: well-managed sustainability should create value for society as well as the business.